The future of middle managers is at risk on Amazon.

• In 2024, one of the major post-pandemic work headlines was Amazon CEO Andy Jassy's decision to have workers return to the office full time.
• Amazon recently experienced another major organizational change, with a greater emphasis on individual contributors. This shift could potentially result in the company cutting up to 14,000 manager positions, as estimated by Morgan Stanley.
• According to organizational experts, Amazon's flattening of its corporate structure is a leading indicator of a new era, and its cost-cutting measures, such as slashing manager roles, provide a glimpse into the future of work.

Andy Jassy, CEO, sent a note to employees about corporate culture in the fall, which received attention due to his five-day-in-the-office mandate. However, Jassy's message about a higher ratio of individual contributors to managers raises a larger question about organizational structure: What is the ideal balance between individual workers and managers in terms of headcount? This has been a challenge for corporations to define with concrete data.

In the post-Covid era, organizational experts predict that Amazon may be pioneering a new approach to efficiency improvements related to corporate overstaffing, particularly in the area of middle management.

"An Amazon spokesperson stated that the company has significantly expanded its teams at a rapid pace, as mentioned in Jassy's note: "Looking back on my time at Amazon, I never imagined I'd still be here after 27 years. One of the reasons I've remained is due to the remarkable growth we've experienced. In the year before I joined, our annual revenue was $15M. This year, we anticipate it to be well over $600B.""

The spokesperson stated that Amazon's growth necessitated the addition of many managers, and in comparison to Meta's recent year of efficiency, the company has added more layers due to its growth. Now, the company believes it is the right time to bring its structure "closer to our customers" and reinforce its "culture of ownership."

The tech sector has seen an equal number of layoffs and hiring over the past few years. In 2022-2023, the sector was known as the years of the layoff. Although layoffs continue, Amazon's approach to downsizing involves a broader reevaluation of how to optimize the largest corporations.

Morgan Stanley analysts predicted that Amazon could reduce up to 14,000 management positions, resulting in cost savings of $2 billion to $4 billion, based on Jassy's note that Amazon aims to increase the ratio of individual contributors to managers by at least 15% by the end of 1Q25, across all divisions.

Jassy highlighted examples of headcount growth, such as the numerous pre-meetings for decision meetings, and established a "Bureaucracy Mailbox" for employees to report processes that hinder decision-making, which he stated "have infiltrated and we can eliminate."

Joseph Roh, a professor at the Neeley School of Business at Texas Christian University, stated that rapid growth can result in the addition of management layers without reevaluating their necessity. He emphasized that the flatter organizational structure is now prevalent, with a greater focus on individual contributors across corporations. There is no one-size-fits-all formula for the ideal ratio of individual contributors to managers, according to Roh. He explained that the ideal ratio depends on the nature of the work, but it is typically in the range of 7 to 10 individual contributors per manager.

As technology giants continue to spend billions on AI, pressure from investors and the need to deliver immediate returns on investment will force companies to cut costs. Meanwhile, some companies like Amazon are pushing for employees to return to the office, but there is a growing sense that AI may already be playing a more direct role in reducing the need for middle management positions.

"As software can now monitor tasks that were previously overseen by middle managers, Roh stated that digital transformation significantly reduces the need for these managers to carry out their duties."

'What you saw from Amazon is just the beginning'

Naeem Zafar, a professor at UC Berkeley Haas School of Business and Northeastern University, stated that the downsizing of the managerial layer is a larger trend set to play out across corporate America, with technology companies leading the way. He emphasized that cultural factors are also at play, such as the new generation of employees who work differently and value freedom and flexibility in their work culture.

Organizations are adapting to the preferences of a younger workforce that values less hierarchy and more autonomy in their roles, as stated by Roh.

Zafar stated that the emergence of AI and a new generation of workers is contributing to a changing perspective on managers. He pointed out that Amazon's recent decision to cut manager roles is not solely about cost-cutting but is a reflection of the evolving nature of work. Technology is eroding the traditional corporate hierarchy, and middle management is being affected.

For decades, managers have been viewed as the "glue holding companies together" and a crucial element in turning strategy into action. However, Zafar stated that AI-powered tools can now analyze data, assign tasks, and track performance with unmatched efficiency. As a result, the question arises, "Why pay for a middleman when a machine can do it better?" he added.

Roh stated that Amazon's growth may serve as an extreme example, but it could also be a leading indicator of a broader corporate trend towards leaner, more efficient organizational structures, driven by the need for cost control, innovation, and competitiveness in rapidly evolving markets.

In order to increase efficiency and profits, companies are adopting flatter hierarchies. However, this shift poses risks, such as sacrificing employee well-being and leadership. Despite these challenges, Zafar believes that the future belongs to companies that can create lean, agile structures that allow employees to excel in a world where machines dominate.